In October 2022, the Inland Revenue Board of Malaysia (LHDNM) and the Malaysian Digital Economy Corporation (MDEC) jointly announced their collaboration on the National e-Invoicing Initiative. LHDNM is responsible for tax administration in Malaysia. The goal of the new system is to enhance efficiency and reduce tax costs. After six months, both parties announced the phased mandatory implementation of the National e-invoicing system.
Several countries have already implemented mandatory regulations for electronic invoicing, while others are planning to introduce it in phases. Malaysia is among the countries that are planning to introduce it gradually. Therefore, businesses with current or future interests in Malaysia should prepare accordingly to avoid penalties from tax authorities. The new e-invoicing will apply to all tax-registered businesses and government entities in Malaysia. The regulations will apply to all organizations, whether engaged in domestic or cross-border transactions.
e-Invoicing Implementation Timeline in Malaysia
According to the 2023 Budget, a phased introduction of e-Invoicing is confirmed by the Inland Revenue Board of Malaysia (IRBM). The shared implementation dates by IRBM are in the following:
- August 1, 2024: Taxpayers with annual income or sales exceeding RM100 million
- January 1, 2025: Taxpayers with annual income or sales exceeding RM25 million and up to RM100 million
- July 1, 2025: All taxpayers
e-Invoicing process in Malaysia
To support the growth of the digital economy, the Government intends to implement e-Invoice in stages to enhance the efficiency of Malaysia’s tax administration management. It is in line with the Twelfth Malaysia Plan, where the focus is on strengthening the digital services infrastructure and digitalizing the tax administration. The e-Invoice will enable real-time or near-real-time validation and storage of transactions, catering to Business-to-Business (B2B), Business-to-Consumer (B2C), and Business-to-Government (B2G) transactions. Also, the following documents will be under the scope:
- Credit and Debit Notes
- Invoices
- Receipts
- Cancellations and Refund
Introduction of Centralized Continuous Transactions (CTC) in Malaysia
In this model, for verification purposes, the invoices and receipts are first sent to the tax authorities in real time before the buyers. For the verification, a structured XML invoice file is required to be submitted to the IRBM platform via API. After verification is done, the supplier will receive the XML invoice then it can be exchanged with a trading party in any format or method. The Buyers will be notified by the IRBM for access to invoices that have been cleared. Regarding the exchange of invoices with the buyers, PDF and other paper forms can be used, however a QR code with a URL needs to be displayed.
Peppol Framework in Malaysia
The implementation of the Peppol e-Invoicing framework in Malaysia is highly favored due to its advanced stage of development, interoperability, and adherence to well-established standards. This framework is widely regarded as the most suitable choice, given its maturity and effective governance. Additionally, it stands out as the most globally adopted e-Invoicing framework, with over 20 countries having successfully integrated and embraced its functionalities.
As planned, this model will include hybrid centralized Continuous Transaction Control (CTC) which is combined with the Peppol network. Basically, with this model, IRBM will validate and approve invoices before they are sent to buyers. Once the invoice is approved IRBM will generate a valid invoice that contains the Unique Identifier Number, date and time of validation, and validation link via API. Thus, IRBM will inform the issuer and the receiver by email. Taxpayers will be able to choose Peppol as an exchange method among the other enabled channels. When Peppol is not used, the integrated and automated electronic exchange can also be used.
The API allows taxpayers to submit e-Invoices directly to the Inland Revenue Board of Malaysia (IRBM), and the methods for transmitting e-Invoices via the API include:
- Direct integration of taxpayers’ ERP system with MyInvois System.
- Through Peppol service providers.
- Through non-Peppol technology providers.
How can SNI help you?
SNI offers SAP add-on solutions for generating and transmitting qualified invoices between public authorities, and private entities.
SNI’s solution extracts taxpayers’ data from their accounting system and directly converts it into the required XML format. It is transmittable through the Peppol Network by Access Point Providers.
